AUS
NZ
UK
CA
USA
IND
_07_03_2026_03_50_21_133108.jpg)
.jpg)
The Bank of Nova Scotia has introduced Callable Contingent Coupon Notes maturing on July 29, 2031, linked to the Nasdaq-100 Index, Russell 2000 Index, and S&P 500 Index performance. These unsubordinated, unsecured notes offer coupon payments contingent on index performance, with the Bank retaining the right to call the entire issue on any call date. Investors face significant risks, including the potential loss of up to 100% of principal if the lowest performing index falls below its barrier at maturity.
Key Highlights
- NYSE ticker: BNS
- Offering Callable Contingent Coupon Notes with a five-year term, expected to price on July 24, 2026, and settle on July 29, 2026
- Notes linked to the least performing among Nasdaq-100, Russell 2000, and S&P 500 indices; minimum investment of $1,000 with increments thereafter
- Coupon payments depend on all three indices closing at or above their respective coupon barrier values on observation dates; Bank may call notes in full on any call settlement date, paying principal plus any due contingent coupon
- At maturity, if not called, principal is returned only if the lowest performing index closes at or above its barrier; otherwise, investors risk losing up to 100% of principal
Note Structure and Contingent Coupon Payment Details
The notes are unsubordinated, unsecured debt obligations of The Bank of Nova Scotia, with payments subject to the Bank’s credit risk. Contingent coupon payments occur only if, on specified observation dates, each of the three reference indices—the Nasdaq-100, Russell 2000, and S&P 500—close at or above their respective coupon barrier values. If any index closes below its barrier on an observation date, no coupon is paid for that period.
These notes do not guarantee interest payments; investors may receive no coupons during the entire five-year term. Payments depend on the simultaneous performance of all three indices, creating a multi-factor dependency. The notes do not represent direct investments in the indices or their component stocks, and holders have no economic interest, voting rights, or dividend entitlements related to the underlying index constituents.
Issuer Call Feature and Implications for Investors
A key aspect is the Bank’s option to call the entire issue on any call settlement date, regardless of index performance. If exercised, holders receive the principal plus any contingent coupon payable on that date. This call right grants the Bank significant control over the investment’s duration and introduces reinvestment risk for investors.
The Bank may call the notes early when market conditions are favorable, such as strong index performance and attractive coupon payments, potentially limiting investors’ upside. Conversely, the Bank may allow the notes to continue if conditions are less favorable. This asymmetry is typical of callable securities and contributes to the notes’ initial estimated value being below par.
Maturity Payoff Based on Lowest Performing Index
At maturity, if the notes are not called, the payoff depends on the performance of the "Least Performing Reference Asset"—the index with the lowest percentage change from initial to final value. Even if two indices perform well, the worst-performing index determines the final return.
If the lowest performing index’s final value is at or above its barrier, investors receive principal plus any contingent coupon due at maturity. If it falls below the barrier, investors incur a loss proportional to the index’s decline, potentially losing all principal. This structure exposes investors to substantial downside risk without principal protection if any single index declines significantly over five years.
Pricing, Valuation, and Initial Estimated Value
The notes are issued at 100% of principal, with Scotia Capital (USA) Inc., an affiliate of the Bank, purchasing and distributing them to broker-dealers. The Bank may pay up to $4.50 per note in structuring fees to third-party dealers. However, the initial estimated value at pricing is expected between $947.66 and $977.66 per $1,000 principal, reflecting underwriting costs, internal funding rates, and structuring fees.
The Bank’s internal funding rate is generally lower than rates for conventional fixed-rate debt, reducing economic terms for investors. The notes’ actual value will fluctuate based on multiple factors and cannot be precisely predicted. SCUSA may buy or sell notes above estimated value in the secondary market for about three months post-issuance, potentially reimbursing some hedging and structuring costs.
Credit Risk and Lack of Deposit Insurance
Payments depend on The Bank of Nova Scotia’s creditworthiness. The notes are unsubordinated, unsecured obligations ranking equally with other unsecured creditors and behind secured creditors in claims. There is no credit enhancement or guarantee beyond the Bank’s credit standing.
The notes are not insured by the Canada Deposit Insurance Corporation, U.S. Federal Deposit Insurance Corporation, or any government agency in Canada, the U.S., or elsewhere. This absence of insurance distinguishes them from traditional bank deposits and places full credit risk on investors throughout the five-year term.
Secondary Market and Liquidity Considerations
The notes will not be listed on any U.S. securities exchange or automated quotation system, potentially limiting liquidity and affecting pricing in the secondary market. SCUSA may engage in market-making, but continuous liquidity or tight bid-ask spreads are not guaranteed.
Investors should be aware that secondary market trading may be limited or unavailable, making it difficult to exit before maturity or an issuer call date. The value depends on market demand and the Bank’s or affiliates’ willingness to trade.
Investment Suitability and Derivative Nature
These derivative notes are based on the price return of the lowest performing index and combine contingent coupons, issuer call features, a worst-of index structure, and downside exposure to index depreciation. Comprehensive risk disclosures are provided in the accompanying documents.
They are designed for sophisticated investors with specific index performance views, tolerance for contingent income, and acceptance of significant downside risk. They are not suitable for all investors and do not confer direct investment, voting rights, or dividends related to the underlying indices or their components.
Pricing Schedule and Settlement Information
The notes are expected to price on July 24, 2026, with settlement on July 29, 2026, which also serves as the initial valuation date for the indices. The term is approximately five years if not called earlier. Minimum investment is $1,000, with additional investments in $1,000 increments.
The notes’ CUSIP is 063941DQ8 and ISIN is US063941DQ80. The offering is registered under SEC number 333-282565 and filed under Rule 424(b)(2) as a preliminary pricing supplement. The Bank is not currently selling or soliciting offers in jurisdictions where not permitted.
Market-Making and Distribution Arrangements
Scotia Capital (USA) Inc., an affiliate, will purchase the notes at principal amount and distribute them to registered broker-dealers without underwriting commissions. This differs from traditional underwriting, with SCUSA acting as principal buyer and distributor.
The Bank may pay up to $4.50 per note in structuring fees to third-party dealers. Potential conflicts exist as SCUSA may engage in market-making post-sale, and secondary market prices may include markups or markdowns reflecting dealer costs and profits. This arrangement may create misaligned interests between dealers and noteholders seeking secondary market liquidity.
